Refinancing is a new credit application, not just a rate change. A little preparation helps you compare like with like and makes it easier to spot whether a low advertised rate is genuinely useful for your situation.
1. Confirm your current loan position
Start with the current balance, interest rate, remaining term, repayment type and any annual package fee. Check whether the loan is fixed and ask the lender for an estimate of any break cost or discharge fee.
If your property value has changed, estimate your current loan-to-value ratio. A lower LVR can improve the options available to you, while a high LVR can bring LMI or limit the benefit of switching.
2. Compare the new loan on the same assumptions
Use the same balance and remaining term when comparing repayments. A lower repayment created by stretching the term can look attractive while increasing the total interest paid over time.
Compare:
- The interest rate and whether it is variable, fixed or split.
- Ongoing and one-off fees.
- Offset and redraw access.
- Extra repayment limits and fixed-loan flexibility.
- Any cashback conditions and clawback periods.
The Refinance Break-Even Calculator compares repayments, fees, upfront costs and the balance still owing.
3. Gather documents before you apply
Lenders commonly ask for proof of income, recent statements for the existing loan and other debts, identification, and details of your living expenses. Self-employed borrowers may need additional tax returns or financial statements. Requirements differ, so confirm them before submitting an application.
4. Stress-test the repayment
Try a higher rate as well as the rate you hope to receive. A refinance that only feels comfortable at one optimistic rate is more fragile than it looks. Use the Repayment Estimator to test monthly, fortnightly or weekly repayments and see the impact of extra repayments.
5. Ask your current lender to compete
Before applying elsewhere, ask your current lender for a retention review. Tell them the rate and features you are comparing, but make the final decision using written terms rather than a verbal promise.
6. Decide with the full picture
Use the Refinancing Hub to work through the costs, repayment change and feature comparison together. General information cannot confirm loan suitability, so consider a licensed lender, broker or financial adviser for advice specific to you.